President Obama Signs The Lilly Ledbetter Fair Pay Act Into Law

President Obama and Lilly LedbetterThe following is a reprint of a client alert authored by EBG attorneys Daniel J. Schuch  and A. Martin Wickliff, Jr.

On January 29, 2009, President Barack Obama signed his first article of legislation into law: the Lilly Ledbetter Fair Pay Act of 2009. With namesake Lilly Ledbetter standing at his side, the President remarked, "[i]t is fitting that with the very first bill I sign—the Lilly Ledbetter Fair Pay Restoration Act—we are upholding one of this nation's first principles: that we are all created equal and each deserve a chance to pursue our own version of happiness." From an administration whose ascension was marked by the promise of "change," the Act provides a clear indication of the President’s commitment to his promise in the area of employment law.

The Act overturns a controversial decision issued by the U.S. Supreme Court which significantly impaired employees’ opportunity to file suit for pay discrimination. According to the Court’s ruling, the statute of limitations, within which employees were required to file suit, began to run when the underlying pay decision was made, not from the point at which the employee received the paycheck being challenged.

The decision was quickly met by outrage from employee advocate groups and a large contingent of Congress. Those in opposition to the Court’s ruling argued employees typically do not learn of pay disparities until significant periods of time pass, often beyond the statute of limitations period applicable to discrimination claims.

The Lilly Ledbetter Fair Pay Act effectively reverses the Supreme Court’s ruling, and amends Title VII of the Civil Rights Act of 1964 (Title VII), the Age Discrimination in Employment Act (ADEA), the Americans with Disabilities Act (ADA) and the Rehabilitation Act, stating the Act would allow pay discrimination claims to be filed within 180/300 days of the issuance of the last discriminatory paycheck, regardless of how long ago the actual compensation decision was made.

 While the Act remains in its infancy, there is no doubt that claims of pay discrimination will increase under the pro-employee law. Companies will have to devise comprehensive recordkeeping policies and practices to counter potential claims of pay discrimination.

I. Background

a. Ledbetter’s Employment at Goodyear

Lilly Ledbetter worked for Goodyear Tire and Rubber Company in Gadsen, Alabama, between 1979 and 1998. She spent the majority of her years with the company working as an area manager, a position primarily occupied by men. As a manager, Ledbetter’s performance was annually evaluated by her superiors. These evaluations served as the basis for her being awarded, or denied, annual raises. Over the years, poor performance evaluations led to Ledbetter being paid significantly less than her male counterparts. When she learned of the disparities in pay (an anonymous note left in her locker), Ledbetter filed a charge of discrimination with the Equal Employment Opportunity Commission (EEOC), thus beginning her crusade for equal pay.

b. The U.S. Supreme Court

Nearly 10 years after Ledbetter filed her charge with the EEOC, the lawsuit ultimately reached the U.S. Supreme Court. On May 29, 2007, the Court issued its 5-4 ruling in Ledbetter v. Goodyear Tire and Rubber Co. Writing on behalf of the Court’s majority, Justice Samuel Alito held "the later effects of past discrimination do not restart the clock for filing an EEOC charge." In support of the holding, Justice Alito made the now well-known statement, "current effects alone cannot breathe new life into prior, uncharged discrimination."

In her dissenting opinion, and on behalf of Justices John Paul Stevens, David Souter and Stephen Breyer, Justice Ruth Bader Ginsburg labeled the majority’s opinion a "cramped interpretation of Title VII," and challenged Congress to "correct this Court’s parsimonious reading of Title VII." Justice Ginsburg stated the statute of limitations should not begin until an employee learns of the discriminatory pay practices because "[p]ay disparities often occur, as they did in Ledbetter's case, in small increments; cause to suspect that discrimination is at work develops only over time."

c. Ledbetter on Capitol Hill

Within 24 days of the Supreme Court’s decision, Representative George Miller of California garnered enough support to introduce the Lilly Ledbetter Fair Pay Act of 2007

in the House of Representatives on June 22, 2007. In just over a month, the House passed the bill by a vote of 225-199. The bill was eventually blocked in the Senate when it failed to receive the necessary votes to overcome a Republican filibuster.

However, as we now know, Ledbetter’s crusade did not end in defeat. Armed with the support of key legislators, including then-Senator Obama, the bill was resurrected in the House of Representatives on January 6, 2009. Three days later, the bill again passed in the House, this time by a vote of 247-171. On January 22, 2009, two days after President Obama was inaugurated, the bill passed in the Senate by a vote of 61-36. The President signed the bill into law one week later. The law is retroactive to May 28, 2007 (the day prior to the Supreme Court’s ruling), and will apply to all claims filed under Title VII, the ADEA, the ADA and the Rehabilitation Act since the effective date.

II. Ledbetter’s Effect on Employers

The Lilly Ledbetter Fair Pay Act essentially eliminates the statute of limitations applicable to claims of pay discrimination. Under the Act, employees have the opportunity to file a claim for pay discrimination years after the alleged underlying discriminatory decision occurred, so long as the charge is filed within 180/300 days of the issuance of the last discriminatory paycheck received by the charging party. Essentially, the statute of limitations starts each time the employee receives a paycheck. For that reason, many employers will be forced to contend with stale claims sometimes without the benefit of documentation, which may have been destroyed, or witnesses, who are no longer available or do not recall key information.

The Act also provides an avenue for retired employees to sue their former employers years after separation for their lost pensions. In theory, each time a former employee receives a pension check, the amount of which may have been determined as the result of past discriminatory pay practices, a new statute of limitations period begins to run. These potential plaintiffs would have the right to have their pension benefits recalculated if they were determined in a discriminatory fashion. Accordingly, companies may face the threat of litigation from former employees whose employment relationship ended years ago.

The back pay recovery period is capped at two years from the filing of the charge of discrimination.

The EEOC receives approximately 5,000 wage bias charge filings each year, and it has warned employers that the agency will now increase enforcement of pay discrimination claims.

III. Recommendations for Employers

Employers are strongly encouraged to immediately revisit their pay practices to ensure lawful systems are in effect. Comprehensive employment audits should be conducted to assess employee wage structures and corresponding job descriptions to identify discrepancies between pay and job duties. Existing disparities should be reviewed to ensure they are the result of legitimate, nondiscriminatory factors.

IV. Conclusion

Passage of the Lilly Ledbetter Fair Pay Act leaves no room to doubt the Obama administration’s commitment to pro-employee legislation. This law will be the first of many employers will be forced to address under the Obama administration. As your company’s goals, objectives, and timeframes are established for the new year, particular care should be committed to assessing your current pay practices and document retention policies to defend against the implications of this new law.